Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The following is a note accompanying a recent financial statement of DFML Plant, Properties, and Equipment are stated at cost less accumulated depreciation. Expenditures for

The following is a note accompanying a recent financial statement of DFML

Plant, Properties, and Equipment are stated at cost less accumulated depreciation. Expenditures for

betterments are capitalized, whereas normal repairs and maintenance are expensed as incurred. The

units-of-production method of depreciation is used for major pulp and paper mills, and the straight-line

method is used for other plants and equipment. Annual straight-line depreciation rates are, for

buildings2 percent to 8 percent, and for machinery and equipment5 percent to 33 percent. (10)

Instructions:

a) Are the depreciation methods used in the company's financial statements determined by

current income tax laws? If not, who is responsible for selecting these methods? Explain.

b) Does the company violate the consistency principle by using different depreciation methods for

its paper mills and wood products facilities than it uses for its other plant and equipment? If not, what

does the principle of consistency mean? Explain.

c) What is the estimated useful life of the machinery and equipment being depreciated with a

straight-line depreciation rate of?

1. 5 percent.

2. 33 percent (round to the nearest year).

d) Who determines the useful lives over which specific assets are to be depreciated?

e) Why do you think the company uses accelerated depreciation methods for income tax purposes,

rather than using the straight-line method?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Payroll Accounting

Authors: Bernard J Bieg, Judith A Toland

29th Edition

1337673196, 9781337673198

More Books

Students also viewed these Accounting questions